Hello Good Day,
Please I need a quick help. I realise the average cost assigned to some of my inventory items is too low. How do I manually update average cost of inventory items?
You can not change the average cost manually.
The average cost is calculated from the history of your purchases.
Why do you think it is wrong?
It’s way below what the the actual cost of the product should be, perhaps due to wrong purchase prices entered over time. And it will be very difficult going back into time to change all those purchase prices.
If you entered incorrect purchase prices, you have bigger problems than low average costs in the Inventory on hand account. You have understated your expenses, resulting in overstatement of income. As a result, you probably paid too much tax, both VAT and income tax. These would be major accounting errors and require correction. Fortunately, it is to your advantage to correct these errors, although it may raise questions by the tax authorities.
To be clear, however, average cost of an inventory item has no accounting connection to what you charge customers for it when you sell it. (Of course, you would hope to be able to sell for more than you paid, but that is purely a business decision.) And it has no relationship to what you could buy replacement inventory for today. It depends only on the cost you paid for it when it was purchased or produced.
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